$10,000 a Month in Passive Income, Part 2 of 2

$10,000 a Month in Passive Income, Part 2 of 2

Within part 1 of this article, I taught you what it will take to put yourself in a position to earn $10,000 per month. Now, it’s time for the details of developing a business that will actually give you the income. Not only am I certain that you could earn $10,000 per month, I believe that you could achieve these results in less than 10 years, plus, you’ll be 100% debt free!

Based on my last article, you should already know the first three steps to preparing yourself for wealth:

  • Rent out some of your space – if you can rent out 2 rooms, you could be earning an extra $600 per month that could go toward your future investments
  • Live on way less – Do whatever you can to save some extra bucks. Stop eating out, get rid of your car if you can (they’re expensive all around), and always buy used
  • Increase your income – Here are some great sources for you to get started: 101 Ways to Make More Money (free eBook by subscribing), and Grand Per Month (an excellent website that shows you how to earn an extra $1,000 per month)

Now it’s time for the investment! By investing right and paying off your debts, I truly believe that you can earn $10,000 per month sooner rather than later.

1) Invest in Rental Properties

As long as you can find a deal, I really don’t mind what type of real estate you invest in. For now though, let’s assume that you’re going to invest in multiplexes. Personally, I like quadplexes. There are 4 units within one investment building which not only gets you more for your buck, but it’s much easier to keep an eye on one building rather than 4.

In my area, properties are cheap. I found a quadplex for $85,000. Each unit has at least 2 bedrooms, and some of them even have 3. They can easily be rented out for $700 a month. With proper marketing and renter selection, we’re going to assume that we can always keep 100% occupancy. I realize that this is the best possible scenario, but let’s just roll with it and see where it takes us.

2) Reinvest the Earnings

If you take your money and buy things like cars or boats, you won’t go far. But, if you decide to reinvest the earnings back into more investment properties, then your future earnings are limitless. Do this for long enough and you’ll soon be buying yachts for cash rather than domestic cars or little 18 foot boats.

With the extra money you earned by renting out your spare rooms, by living on less, and buy earning an extra income, you could pocket an extra $2,500 a month. After just 4 months, you’ll have a great down-payment on your first investment property. If you purchased the property right, you should be paying only 80% or less than the asking price.

For our $85,000 property, I would pay no more than $70,000, put my $10,000 down, and get the remaining $60,000 from the bank on a 30 year note. So, my payment each month would be something like $300, which is nothing compared to my potential earnings. If we put our $2,500 a month, plus the $2,800 in rent toward the mortgage, we could have this quadplex paid off in a year! Now we own 100% of our investment and it’s still yielding us $2,800 a month.

Now it’s time to reinvest! If we’ve been shopping around for other properties while we were paying off the first one (and we definitely should have been), then I’m sure we’ve already got another money-maker in our sites. This time, we found a quadplex in a better part of town that costs $150,000. Sure, it’s more expensive, but the tenents are more predictable and the rental income is $1,00o per unit, not $700. With this new income of $4,000 a month, our available cash each month is $9,300! If we put that toward the mortgage payment each month, we could have this investment property paid off in only a year and a half!

At this point, we’re about 3 years into our plan and you own $230,000 worth of investment property and you have a passive income of $6,800 per month. At this point, all you have to do is find one more quadplex that’s similar to the last one. Purchase it at $150k and use your $13,300 (4,000+4,000+2,800+2,500) to pay it off in just a year.

Now you own about $400,000 worth of rental properties and $10,800 in passive income. It’s time to quit your job and continue to build your rental empire! 

It Didn’t Even Take 10 Years

Did you notice  how long it took us to earn our $10,000 per month with zero debt? It took less than 5 years!!! Of course, that’s if everything goes perfectly and if you have zero expenses (which obviously never happens), so rather than predict the impossible, I gave you an extra 5 years. If this works on paper in just 5 years, you could easily do it in ten.

What do you think about this plan? Could you do this? Is it part of your future plan?

5 Responses to $10,000 a Month in Passive Income, Part 2 of 2

  1. Mark says:

    While the concept is sound. There are alot of costs with rental properties that reduce income – Vacancy, repairs, Property Tax, Insurance, Delinquency, Collection costs.

    Secondly, Rental properties are not passive, unless you pay some one to manage them.

    That said, they are a great way to increase your monthly cash flow.

    • Derek says:

      Good points Mark. Notice that my plan did not include taxes, insurance, etc., but I also accomplished my $10,000 per month within 5 years. I figured that with the extra expenses, I could do it in 10. As for the comment about rental properties not being passive, well, they are tons more passive than going to work everyday!

      • Definately rental properties are a step in the right direction. It is important to look at those who have the passive income and see how they achieved their goals. And there are many wealthy people who only ever invested in property… and so it doesn’t harm to take a page out of their book. Although that said passive income in any other form is not to be snubbed at :)

  2. Eric says:

    I feel as there is a flaw in this, thinking that the $2500 a month is a sure thing. Are you really going to be able to live with out a car for 5-10 years? My household income is $5000 a month with $2000 of that going to school loans that are at 6.8%, I don’t see a way to get another 2500 our of our budget.
    I have always liked the idea of rental properties, but in Minnesota you must have 30% down to purchase a rental property, and that $10000 wouldn’t cover that at all.

  3. James Martin says:

    I would love to buy a $150,000 piece of property that is throwing off $4000 a month in income.That is a gross profit of over 30%. Most rentals yield less than half of that or 5% – 15%.

    Where are you buying your property?

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